Owners of the historic Hedrick Building, more recently known as the Flats On St. Mary’s, have abandoned plans to turn the long-vacant, 10-story structure into a 54-unit apartment building. Instead, they are turning to a national hotel chain to lease the top nine floors and operate about 40 rooms.

“The lease is in place … on a majority of the building,” Craig Glendenning, manager of Great Divide Realty & Development told the Rivard Report Tuesday. He declined to name the hotel company, but said it caters to longer-term stays.

Restaurateurs and coffee shop operators have expressed interest in leasing the renovated ground-floor retail/commercial spaces at 601 N. St. Mary’s St. and the adjacent Voss building, Glendenning said. The latter space at 617 N. St. Mary’s St. is also being developed by Great Divide.

The second floor of the Voss Building would feature five apartments at about 1,000 square feet each, Glendenning said. The units in the Hedrick Building were slated to be small studio apartments, and the company “started second-guessing the validity of the functionality of a 325-square-foot apartment,” he explained.

Switching the Hedrick’s use from housing to hotel was a “purely monetary decision,” Glendenning said, adding that “it may work better for someone staying a few days than someone staying every day” given the “lively bar scene” and live music component he is seeking from ground-floor tenants.

Initial plans call for nine one-bedroom and 31 two- and three-bedroom units with kitchens and rooftop access to accommodates families, dogs, and long-term business travelers, he said. Both the Hedrick and the Voss would feature rooftop venues accessible to the public.

The Center City Housing Incentive Program (CCHIP) was put on hold in January after some criticized the affordability of the housing the City was incentivizing with that and other programs. City Council is expected to vote on changes to the programs in September.

Great Divide notified the City of the project change yesterday, according to John Jacks, director of the Center City Development Office, but has yet to officially pull its CCHIP agreement – which was filed and awarded last year before the program pause.

“The project would [have received] City fee waivers estimated at $24,765, SAWS fee waivers that total $235,434, a construction loan in the amount of $324,000, and a tax rebate on the City ad valorem taxes that the developer pays to the Houston Street TIRZ for 15 years,” Jacks told the Rivard Report via email. “The tax rebate was estimated to be approximately $31,000 per year.”

So far, the developer has only claimed $1,098 in City fee waivers related to general repair and demolition, Jacks said.

“Once the CCHIP agreement is terminated, staff will work with the developer to determine if the new project could qualify for City fee waivers for the new project scope under the inner city reinvestment infill policy. If it does not, the City will seek payment for the $1,098 in city fees that were waived.”

The 2015 vacant building ordinance requires owners of unoccupied buildings in certain areas to register with the City ($250 for single-family residences and $750 for all other buildings) and maintain minimum aesthetic and maintenance requirements – or face fees.

“The vacant building program is what started this whole thing,” Glendenning said. “The fines are minimal, but it brings it up to your mind … you have to be a good citizen” and do something with your property to provide “a service to the community.”

Removing 17 truckloads of pigeon droppings and 1960s aluminum cladding from the building revealed terracotta Spanish colonial detailing and made the building ready for more substantial redevelopment, he said.

Final renovation and construction plans will require approval from the Historic and Design Review Commission and Development Services Department.

This is a great example to counter people that think the city shouldn’t “subsidize” market rate housing.

The truth is that alternative uses often have lower risk and higher returns, even after the fee waivers offered to developer.

The city really ought to go back to the drawing board with these guys with a bigger incentive package if they do housing. An extended stay motel across from the bus station is just asking for more problems in that area.

This is a good location for reasonably priced housing- it could be a good test for new affordability initiatives.

Good point. It’s definitely a reminder that just because a market “feels” hot, doesn’t mean that developers can jump in and make lots of cash meeting the needs of the market. It’s a shame this cool building couldn’t actually end up as permanent housing.

Great, instead of more downtown residents, we’ll get more corporate apartments. It’s disappointing that the owner/developer isn’t going to stick to the plan and take advantage of the housing incentives, but they never would have put in the money and effort to learn that they had an AirBnB goldmine if they city hadn’t started up with the vacant building fines.

I, too, hope that the city will go back to the drawing board with them, but something is better than nothing.

Truly disappointing news. I was so looking forward to seeing some new residences added to the downtown core. Unfortunately, our hotel industry makes it so that building anything but hotels becomes economically infeasible for most developers. As stated in an above comment, this is exactly the reason that the City should continue to provide incentives for market rate housing in downtown. When will we break through this cycle of building for tourists and not for locals?

what is ironic, the ownership group who was forced to sell it, always wanted to put an AAA hotel there but never had enough funding to make it happen (for 20 years) nor the connections….I believe they wanted demolition and new construction…… At least it’s being invested in and tenants/users will support local retail owners. Nice terra cotta work and a historic building is being preserved.

Fee waivers are great, but that’s really a minimum starting place. For the City to say “we were going to charge you $500,000 in fees for the right to build here, but we like housing so now we won’t” isn’t a subsidy, it’s just removing a penalty.

It’s like when the gym “waives” the $500 initial fee. I’ll take it, but don’t act like it’s some huge favor- I’m still paying the monthly fee every month.